On Thursday, credit rating agency Moody's downgraded Erickson's $355 million bond debt two full notches to Caa3, assigning it a very high credit risk. The credit rating agency called Erickson's current capital structure “untenable,” noting, “The company relies heavily on its revolving credit facility, which has limited borrowing availability and Moody's anticipates that if the fixed charge coverage covenant were to be tested in the near term, the company would breach it. Liquidity is further constrained by a requirement (under a recent revolver amendment) for the company to refinance the facility or incur significant fees.
"Although Erickson has won and extended some contracts, it is has had limited success in replacing the value of lost or ending contracts with the U.S. Forestry Services (USFS) and the U.S. Department of Defense organizations (DoD), and in expanding the commercial customer base to diversify from its pure legacy air-crane and heavy-lift operations. Moody's anticipates the difficult operating environment will continue for some time. The aforementioned factors make the company susceptible to a liquidity crunch and increase the likelihood that it will seek to restructure its debt to achieve a more tenable capital structure.”